Stone Energy Corporation (SGY) Bombs on Chapter 11 Chatter

Stone Energy Corporation (SGY) stock is on track for its worst day ever

by Alex Eppstein

Published on Oct 21, 2016 at 10:47 AM

Stone Energy Corporation (NYSE:SGY) shares are getting obliterated this morning, after the oil-and-gas company announced it may file for bankruptcy before the end of the year -- a move that wasn't totally unexpected. At last check, the energy stock has plunged 42.4% to trade at $5.58, which would mark its worst daily percentage loss ever.

In conjunction with the Chapter 11 chatter, SGY entered into a restructuring support agreement (RSA) with senor noteholders. "The execution of the RSA is the culmination of months of hard work to right-size our balance sheet in response to a sustained period of low oil and natural gas commodity prices," said CEO David Welch. This news follows yesterday's $360 million sale of Stone Energy's Appalachia properties to Tug Hill.

With SGY sliding, it should come as no surprise that the stock is on the short-sale restricted list. That said, bearish bets are already sky-high on the shares. Specifically, over two-fifths of the stock's float is sold short, not far from record levels achieved in August. Suffice it to say, short sellers should be in good shape today.

The brokerage crowd has been skeptical toward SGY, as well. All seven analysts tracking the shares have dished out a "hold" or a "strong sell" recommendation. However, the stock's average 12-month price target still stands at $8.31 -- well above the current perch -- suggesting price-target cuts may be in order.

Technically speaking, Stone Energy Corporation (NYSE:SGY) has been nothing short of a disaster in 2016, plunging 87%. However, the stock is still a ways from its all-time low of $2.70, touched in mid-May. Obviously, this could all change if the company goes through with its Chapter 11 bankruptcy filing.

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